Average: 5 4. The cost of retained earnings Aa Aa True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. O False True The cost of equity using the CAPM approach The current risk-free rate of return (Rr) is 4.67%, while the market risk premium is 6.63%. the D'Amico Company has a beta of 0.78. Using the Capital Asset Pricing Model (CAPM) approach, D'Amico's cost of equity is 8.86% 10.82% 10.33% 9.84% The cost of equity using the bond yield plus risk premium approach | The Adams Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company's cost of internal equity. Adams's bonds yield 11.52%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 3.55%. Based on the bond-yield-plus-risk-premium approach, Adams's cost of internal equity is: O 18.8496 14.32% O 18.08% 15.07%